Natural Extracts Market

Market Overview

The global natural extracts market size was valued at USD 11.17 billion in 2022. It is estimated to reach USD 21.95 billion by 2031, growing at a CAGR of 7.8% during the forecast period (2023–2031). The preferability of natural, eco-friendly, and organic ingredients and natural extracts among various end-users like personal care and cosmetics, food and beverage, and nutraceuticals is expected to drive product demand over the anticipated period.

Natural extracts refer to substances derived from natural sources such as plants, fruits, flowers, and herbs. These extracts are obtained through various extraction processes that aim to concentrate and capture the beneficial compounds present in the source material. Natural extracts contain many bioactive compounds, including phytochemicals, essential oils, antioxidants, vitamins, minerals, and other plant-based substances that contribute to their therapeutic properties and potential health benefits. Natural extracts are widely used in various industries, including pharmaceuticals, cosmetics, food and beverages, and nutraceuticals. In the pharmaceutical industry, natural extracts are utilized as active ingredients in medicines and supplements, as they possess medicinal properties that can help alleviate symptoms and support overall health. For example, herbal extracts are commonly used in traditional medicine systems like Ayurveda and Traditional Chinese Medicine.

In cosmetics, natural extracts are valued for their skin-nourishing and rejuvenating properties. They are incorporated into skincare products, hair care products, and personal care items due to their ability to moisturize, soothe, and improve the appearance of the skin and hair. Natural extracts also provide natural fragrances, colors, and flavors to cosmetic formulations. Natural extracts enhance food and beverage products' flavor, aroma, and nutritional value in the food and beverage industry. They commonly produce beverages, confectionery, baked goods, and savory products. Without artificial additives, natural extracts can impart specific tastes, such as vanilla, coffee, or fruit flavors.

Market Dynamics

Global Natural Extracts Market Drivers

Growing Demand for Natural and Eco-Friendly Ingredients

Personal care and cosmetic industries offer a broad range of bio-based/plant-based products because the demand for such products is huge, especially in developed economies such as the U.S. and the U.K. This also presents lucrative growth opportunities for the companies engaged in organic cultivation and extraction in developing economies like China and India for exporting their products to North American and European regions. Application scope of natural extracts revolving around personal care and cosmetics, food and beverage, and nutraceuticals end-users that highly prefer natural, eco-friendly, and organic ingredients is expected to drive the product demand over the anticipated period.

Growing concerns regarding the environmental impact of using conventional chemical ingredients have also helped promote the widespread adoption of sustainable and bio-based ingredients across the end-use industries. This has helped the key industry participants gain consumer confidence, abide by their sustainability norms, and reduce their carbon footprint. These factors have led mature markets such as the U.K. and the U.S. to have a higher production of personal care products primarily from natural ingredients, with major brands such as Melvita, Annemarie Borlind, JĀSÖN, and Avalon Organics increasing the content of natural ingredients in their products.

Increasing Adoption of Natural Extracts in End-Use Applications

Significant growth in the personal care and cosmetics market is expected to benefit the natural extracts market as it is one of the prominent application areas for natural extracts. According to India's Ministry of Economy and Industry (Foreign Trade Administration), India's personal care and cosmetics industry is one of the fastest-growing industries with strong potential for growth and investments from foreign manufacturers.

Factors such as increasing adoption of anti-aging products, men’s grooming products, online and at-home beauty and personal care services, an expanded repertoire of products, holistic bridal services, shelf space, boutiques, and retail stores across the country have positively influenced product demand. India's per capita expenditure on beauty and personal care products is growing in line with its GDP growth.

Global Natural Extracts Market Restraints

Environmental and Sustainability Concerns

Production of natural extracts on a commercial scale requires large plantation areas that often involve the clearance and extensive cutting of forests and land expropriation. The establishment of such large plantations is also associated with biodiversity loss. Land areas available for large-scale cultivation are limited and involve the application of several agrochemicals such as fertilizers, pesticides, and weedicides that create sustainability concerns.

Also, they depend on weather variability (short-term and long-term effects of climate change), availability of labor, and high-grade seeds. Numerous forests have been cut down to derive very small amounts of natural extracts. Several arable lands have also been converted into monoculture farming lands to cultivate a single plant or crop to derive specific oil. Production of these crops and plants is undertaken by large multinational firms that disregard the environment and endanger numerous ecosystems. Such factors create significant sustainability-associated restraints for the global natural extracts market.

Global Natural Extracts Market Opportunities

Increasing Consumer Demand for Natural and Clean-Label Products

The global natural extracts market presents significant opportunities driven by the rising consumer demand for natural and clean-label products. Consumers today are more conscious about their products' ingredients and actively seek natural alternatives that align with their health and wellness goals. This growing awareness has fueled the demand for natural extracts derived from plant sources, perceived as more wholesome and beneficial.

One of the key drivers of this demand is the preference for clean-label products. Consumers seek transparency and simplicity in product formulations, avoiding artificial additives, synthetic chemicals, and preservatives. Natural extracts provide a solution to meet this demand with their inherent plant-based properties. They offer a way to enhance products' flavor, aroma, and nutritional profile without compromising naturalness and purity.

Regional Analysis

Based on region, the global natural extracts market is bifurcated into North America, Europe, Asia Pacific, Central and South America, the Middle East and Africa.

North America Dominates the Global Market

North America is the most significant global natural extracts market shareholder and is estimated to grow at a CAGR of 5.2% over the forecast period. The consumption of products manufactured from naturally sourced ingredients in food and beverages, pharmaceuticals, personal care, cosmetics, and nutraceutical end-uses is more prevalent in developed countries, and this is likely to pave the way for the natural extracts market shortly in North America. This region has the second-largest essential oils market, mainly driven by flavors and fragrances used in food items, beverages, and medicinal products. The presence of food and beverage and pharmaceutical industries and other end-users of flavors and fragrances characterizes the North American market. This has benefitted the market growth of essential oils in the region.

Furthermore, rising awareness regarding the importance of a healthy lifestyle and increasing acceptance of natural products will boost market growth in North America over the coming years. In the U.S., herbal health supplements and products have become a billion-dollar industry with a *growing demand for naturally processed products over chemical-based ones. Herbal medicine is considered one of the oldest forms of healing, especially in Canada, where herbs and natural products have seen unprecedented growth in their sales and consumption.

Europe is anticipated to reveal a CAGR of 5.6% over the forecast period. In European countries, using essential oils in cosmetics as fragrances offers numerous opportunities to the manufacturers of such essential oils. As per the CBI (Centre for Promotion of Imports from Developing Countries), essential oil products account for more than 50% of the global demand in this region, mainly driven by natural and personal care and food and beverages industries. A developed economy and high standards of living compared to Asia and other developing regions are the major factors propelling the demand for essential oils and floral extracts, which, in turn, is anticipated to drive the regional market.

In Europe, aromatherapy is a major application of essential oils. France, Austria, Germany, and Switzerland are the major markets for aromatherapy used for therapeutic purposes. The Netherlands and the UK are other significant markets for aromatherapy.

In Asia-Pacific, countries like China and India are projected to lead the natural extracts market and have emerged as the largest exporters of some of the world's most precious oils and extracts, such as Havana and spice oils. Historically, China and Japan are among the largest nutraceutical markets in the entire region. The natural extracts market has witnessed healthy growth with increased use in pharmaceutical products and nutraceutical supplements in Australia and South Korea.

Central and South American countries are expected to witness a rising consumption trend of products manufactured from natural extracts owing to the region's shifting consumer eating habits and favorable regulatory developments. Food and beverages are the prime industry in this region that has devoted increasing efforts to product innovation as per consumers' demand.

The Middle East and African essential oils market has been observing remarkable growth for the past few years due to increasing local demand. The demand for consumer goods is directly related to the growing population and rising living standards. Natural remedies are still regarded as the customer’s choice in this region as they have been long used in the Arab world for treating health issues. In the traditional markets of Arabia, using natural extracts, mainly essential oils, is higher.

Segmental Analysis

The global natural extracts market is bifurcated into products and applications.

Based on products, the global market is bifurcated into essential oils, oleoresin, herbal extracts, natural colors, and dried crops.

The essential oils segment dominates the global market and is projected to exhibit a CAGR of 7.5% over the forecast period. Essential oils are extremely pure plant extracts that may be extracted in various ways, such as steam distillation, cold pressing, or solvent extraction. They are known for their characteristic aroma and therapeutic properties, making them widely used in aromatherapy, cosmetics, personal care, and food and beverages. One of the key drivers of the essential oils market is the increasing consumer preference for natural and organic products.

Essential oils are perceived as pure and natural, making them popular ingredients in natural personal care products, perfumes, and home fragrances. The expanding understanding of essential oils' potential health benefits, such as stress relief, relaxation, and mood enhancement, has further fueled their demand for aromatherapy.

Based on application, the global market is bifurcated into personal care and cosmetics, food and beverage, animal feed, pharmaceuticals, nutraceuticals, and others.

The personal care and cosmetics segment dominates the global market and is projected to reveal a CAGR of 7.7% over the forecast period. Eucalyptus, peppermint, and tea tree oils are some of the most widely used essential oils in spa and relaxation applications. Essential oils can be melted into a bathtub, sprayed in linens, or diffused in a room using a diffuser to create a spa-like experience. Essential oils are the perfect ingredient for personal care products, including perfumes, body sprays, air fresheners, and cosmetics, because of their pleasant aroma. According to their volatility, essential oils used in perfume are divided into base notes, middle notes, and top notes.

Busy lifestyles, hectic schedules, work stress, increasing single-person households, a growing aging population, and rising urban dwellings have emerged as major factors boosting the demand for spa and relaxation services. An increasing number of consumers are visiting spa centers for aromatherapy and massage to rejuvenate physically, emotionally, mentally, and spiritually. This is driving the spa industry across the globe.

Recent Developments

• June 2023- Kalsec, Inc. announced the launch of its new line of natural extracts. The new line includes ginger, turmeric, and black pepper extracts and is designed for various food and beverage applications.
• May 2023- Naturex announced the expansion of its production capacity for natural extracts. The expansion is expected to meet the growing demand for natural extracts in the food, beverage, and cosmetics industries.